What is a Biological Asset?

Explanation of a biological asset

A biological asset is any living plant or animal that is managed by an entity as part of its business activities. These assets change naturally through growth, degeneration, production and reproduction, processes collectively known as biological transformation. As they develop, they may produce agricultural produce or generate additional biological assets.

Examples include livestock, fruit trees, vineyards, forestry plantations and growing crops before harvest. Some biological assets are cultivated for repeated use over many years, while others are intended to be harvested or sold after reaching maturity.

Under UK accounting standards, including FRS 102, and under IAS 41 Agriculture for entities applying IFRS, biological assets are subject to specific recognition and measurement requirements that distinguish them from inventories and property, plant and equipment because of their living nature and ongoing biological transformation.

Key characteristics of a biological asset

Key characteristics of a biological asset include:

• It is a living animal or plant.
• It may be intended for ongoing use or eventual sale.
• It undergoes biological transformation throughout its life.
• It may produce agricultural produce or additional biological assets.
• It is accounted for under specific agricultural accounting requirements where applicable.

How a biological asset works

1. An entity acquires or develops a living plant or animal.
2. The biological asset is actively managed as part of agricultural activity.
3. Biological transformation changes the asset through growth, production or reproduction.
4. The asset may be harvested, sold or retained for continued use, depending on its purpose.

Example of a biological asset in practice

A UK forestry business owns a plantation of growing trees that will be harvested for timber in the future. The trees are biological assets because they are living plants undergoing biological transformation until they are harvested.

Related terms

• Agricultural activity
• Agricultural produce
• Biological transformation
• Harvest
• Inventory
• Fair value
• IAS 41
• FRS 102

Common misconceptions about a biological asset

• A biological asset is not the same as agricultural produce, which exists only after harvest.
• Not every plant or animal owned by a business is a biological asset for accounting purposes.
• A biological asset does not have to be intended for repeated use throughout its life.

Frequently asked questions about biological assets

What is a biological asset?

A biological asset is a living animal or plant that is managed by an entity as part of its business activities.

What are examples of biological assets?

Examples include livestock, growing crops, orchards, vineyards, forestry plantations and other living plants or animals used in agricultural activities.

How is a biological asset different from agricultural produce?

A biological asset is the living plant or animal itself, while agricultural produce is the harvested product obtained from that biological asset.

Can a biological asset be used for more than one production cycle?

Yes. Some biological assets, such as fruit trees or dairy cattle, may continue to produce agricultural goods over multiple years rather than being harvested after a single cycle.